Reference no: EM132660635

Omega Company has provided the following information prior to any year-end bad debt adjustment:

• Cash sales are $150,000
• Credit sales are $450,000
• Accounts receivable (gross) are $110,000
• Allowance for doubtful accounts balance is $1,200

Problem 1: Omega prepares an aging of accounts receivable and the result shows that 5% of gross accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after the bad debt expense is recorded?

A) $5,500

B) $6,700

C) $4,240

D) None of the above